The Changing Retirement Paradigm
I recently read the results of an AGD sanctioned survey of some 1600 online members. The operative question was, “What are their retirement goals?”
Practice management pundits often throw around 6% as the percentage of dentists who can retire in a manner to which they have grown accustomed. 6% doesn’t sound like very many, what’s behind this statistic. Thankfully, Kim Graham Lee, (CEO of Hufford Financial Management) has a research report in the AGD Impact, November 2007, which details some interesting observations and limited encouragement.
Here is her “30 second story”:
• “Full retirement” is not in the vocabulary of most dentists. Dentists enjoy what they do, and most do not have any intentions to retire fully from their profession. Only one out of three dentists plans to retire completely.
• AGD dentists have sought information and engaged in a number of financial planning activities to help them with retirement funding, yet many admit to not being entirely knowledgeable about investing or confident in their planning.
• Most dentists are not on track financially to meet their retirement goals, especially considering that the majority intend to live a lifestyle that is on par with, or higher than, their current standard of living. The best-case scenario is that 3 out of 10 AGD dentists will have enough income at retirement to meet their current standard of living. There is a gap between perception and reality.
The results showed a surprising result that represents a changing paradigm, that most AGD dentists have no intention on full retirement. Gone is the notion of retiring at 65. This is actively being re-branded into “the new” aging workforce.
More than half envision working part-time well into “retirement”. What is retirement anyway? There seems to be a new trend, like double income families, now its called “bop till you drop”. And, “yes”, it is a necessity, without proper planning, to do what most (70%) have to do, and that is, KEEP WORKING.
All money aside, and most say that money is not the primary reason why they keep working; they say they work to keep busy, to stay in touch with colleagues and patients, and continued learning. Yet, only one out of two in the sample has even calculated how much they might need in retirement, if ever they were to fully retire.
It is interesting how we perceive the future; either it is something that comes after the present or it is something we anticipate and plan for.
Amazingly, only 50% have worked through retirement goals and financing with their spouses. I wonder if this is the same number of dentists who don’t have any intention of retiring and have yet to calculate how much they might need?
The paradox is that of 11 competing financial priorities, including planning for a vacation, saving for retirement comes in at the top of the list, the number one priority.
In terms of actual retirement savings, Brian Hufford says, “Which situation is preferable: 1) having no debt at age 50 and the ability to have $700,000 saved at age 62; or 2) having $300,000 of debt at age 62 while having $3.7 million saved? This seems like a silly proposition, but the great majority of dentists choose the first strategy. To realize the second alternative, a dentist must start saving early and save consistently every year.” Making savings your primary goal”. This is also called the power and magic of compounding returns.
Why is it that among these dentists, their savings percentage peaks between ages 50 and 54 (the median is 16 percent of net profit)? Is it because they did not start saving early enough?
It was learned from the study that the most common source for retirements funds were from investments in stocks, bonds and mutual funds even though 70% acknowledged that they were not very investment savvy. Despite this, 77% were confident that they would not have to work in retirement, even though they intend to. And this is where reality and wishful thinking hit the road! The survey concludes that 70% of those surveyed will not have sufficient retirement income to maintain their current standard of living. Surprised? You can learn more from the article directly. http://www.agd.org/publications/articles/?ArtID=2450
